1. A call option with an exercise price of $90 is selling for $6. The price of the underlying is $87.
The profit at expiration for the buyer when the underlying is priced at $94 is most likely to be:
A. – $2.
2. Consider a call option selling for $10 in which the exercise price is $100 and the price of the underlying is $96. The maximum profit to the buyer and the maximum profit to the seller is:
A. ∞ and $10 respectively.
B. $10 and ∞ respectively.
C. $96 and $4 respectively.
3. You write a covered call with a strike price of $40. The call premium is $2. The underlying stock is currently selling for $36. What is the profit range at expiration?
A. -$36 to $42.
B. -$34 to $6.
C. $6 to infinity.